Computers & taxes: a review of the leading tax software programs.
This single factor--the need for CPAs to renew their commitment or risk acquiring new programs-- has been the major force for maintaining the great diversity among the competition. And, paradoxically, it's the reason why so many tax practitioners grumble that they feel locked into the software packages they currently are using. Switching to another package is undertaken with great reluctance. Learning a new program requires an investment of time; any switch requires converting clients' files to a new format. continued on page 58
For these reasons, most accountants stick with their old packages--whether they like them or not. Thus, software publishers, because they need to protect their market share, have no inducement to make their packages compatible with competitors'. In fact, their competitive juices compel them to make their products as incompatible as possible as a way to keep customers from jumping to a rival. Thus, diversity is the name of the tax software game.
BARRIERS TO SWITCHING
Even if a customer is determined to switch from the old package, other barriers exist. Which package should be chosen? The choices are mind-boggling. There are about 80 competing tax packages in the market today, and there is no practical way a CPA can adequately analyze all of them, or even a significant number. While accounting and tax magazines and newsletters offer some help in the selection process, there has been no authoritative place to get the comprehensive information needed to make a decision. The only solution is to conduct personal test runs with programs--an expensive and time-consuming process. Although some tax preparation publishers offer the prior year's packages at minimal cost for prospective buyers to get the feel of their products, a brief test drive cannot compare with a real-time, working session.
Most tax preparers make their choices based on colleagues' recommendations or persuasive sales pitches. Vendors spend the bulk of their marketing dollars on attracting new users, but cracks in this marketing strategy are starting to appear. In recent years, an increasing number of software publishers-and some third-party vendors--have mounted an effort to topple that no-switch barrier by offering to convert a potential customer's existing tax databases as an inducement to switch.
Despite such problems, CPAs must stay abreast of the technical changes in the market so they can take advantage of the fastest and most accurate programs. Superior packages make a significant difference in a CPA firm's bottom line. As with other software for accountants, there is no one "right" tax package for all CPA firms. This article, however, can help a firm decide which is best for it. Included in this' analysis are five comprehensive charts that provide additional details about the products.
In general, software vendors have been designing their programs so they can be used on as wide an assortment of hardware as possible. Therefore, they often support everything from old 8086 computer models to the newest, most powerful 486 vintage. However, designing programs with such flexibility places severe restrictions on the speed and performance of software. As a result, leading vendors are moving away from such wide support, focusing instead on minimum configurations of 386 computers, DOS 5.0, 4 megabytes of memory and laser printers. Given the price of hardware today, it's not economical to have tax preparation hardware with less capacity than that.
Also, the CD-ROM will have a big, positive impact on the market-it will change the way tax software is used. The little CDROM disk, similar to a music CD and able to store thousands of pages of data, is moving into the tax field not only with the software to prepare returns but also with comprehensive tax reference libraries and basic accounting modules integrated into the tax preparation software. Last year only 2 of the 20 packages reviewed for this article provided their programs on CD-ROM---CLR Fast-Tax GoSystem and ProSystem rx. This year, CLR Fast-Tax is introducing a new tax product that comes bundled with the Research Institute of America's tax reference library. In a few years, most programs likely will be on CDROMs, and they, too, probably will include such tax services as RIA and Commerce Clearing House, making research easy.
The other big advance in the next few years will be the advent of "smart" software. Current software requires the user to place the fight information on the fight line and on the fight form. Future software will do much of that work automatically. Input will be more free form, with the user simply identifying the source document and line number for W-2s, 1099s, K-Is, etc. Also, future tax software will be fully integrated with both accounting software and comprehensive tax reference libraries, so the touch of a key or a mouse will provide the needed research backup.
The goal of many software publishers--and certainly the hope of most users--is that the day will come when a person can operate a program without referring to a technical manual. The widespread use of "context-sensitive" help within a program--where the touch of a key will evoke a help screen that addresses the place on the screen where the cursor is located will help achieve that goal.
For this review, I examined 20 tax preparation packages from 17 vendors. I reviewed only personal tax programs. In each case, I installed the software on a single computer, using a "benchmark" tax return complicated enough to test the software's ability with the most frequently used schedules and the calculation of modified adjusted gross income (MAGI) and the alternative minimum tax (AMT).
However, CPAs should not assume, because a 1040 program received a favorable review, the business or state modules from the same publisher match it in user friendliness, effectiveness or even that the modules will resemble the 1040 screens.
To my surprise, the 1040 program tests disclosed that none of the software packages yielded the same result. The total discrepancy, in terms of tax dollars for an income of $150,000, was over $2,700. Differences were attributable mostly to technical default variations in each program. Also, some differences were due to actual calculation errors. For example, each program treated K-1 capital gains and losses differently. Some handled them as portfolio income losses, others handled them as passive losses and still others treated them in more than one way.
I mention this because tax preparers must be cautious when running a program on "auto pilot"--in effect, letting the program's default setups make professional decisions. Unless a preparer is fully familiar with all the assumptions a program makes, each decision level of a tax preparation process needs review, which, of course, is how every return should be treated. But, unfortunately, in the last-minute rush toward April 15, that process gets strained. And the CPA should be aware, too, that not every publisher tells customers how it has set its defaults. While I point out these problems as I found them, by no means is this list complete; so users should be alert to this problem.
While the information from these tests should help CPAs identify the packages that best fit their needs, there are other, equally important criteria they should weigh before deciding on a purchase. These include the following:
* Release and revision dates. Software publishers often have to wait for tax officials to complete the design of tax forms before a program can be released. Some vendors move quickly; others do not. A CPA considering a new vendor should check with current users to see if they have encountered release problems, especially with state software.
* Pricing. Prices published in this article are a guideline only. Most vendors offer discounts--in some instances, deep discounts--to get new business, particularly for early commitments. Renewal prices are not as flexible. If a vendor's first-year price is particularly enticing, the CPA should take a close look at renewal pricing.
* Technical support. Need for technical support depends on a firm's personnel, the complexities of the software and the nature of its tax practice. Although this article lists technical support hours, the quality of a publisher's support personnel and its responsiveness are difficult to assess.
* Preparation speed. The time it requires to process, review and print a tax return can be far more important to medium-sized to large firms than the initial cost of the software. Time is indeed money, and software inefficiencies are costly. While an overall rating is assigned each product, for both learning speed and ease of data entry, these are subjective assessments that depend largely on a users familiarity with a product, the method of input and the complexities of the returns.
In general, software should make input easy. However, there is often a trade-off between convenience features and speed. The most complete packages are FastTax, ProSystem rx, A-Plus and Tax Advantage. Although they generally are easy to use and comprehensive, those pluses tend to make them slower than many other less complete programs.
Here, then, is my analysis of the major products on the market:
Arthur Andersen & Co., 2803 Fruitville Road, Sarasota, Florida 34237 Telephone: (800) USA-1040; (813) 365-9469; fax: (813) 366-0882
Learning: A-Plus is a powerful and comprehensive program designed to handle the most complex returns. As a result, the learning curve is high. An estimated 20 to 40 hours of training are required for proficiency. Both a hands-on demonstration disk and a sample return are included for training purposes. Rating: Below average.
Operation: Data input supports both interactive and batch processing. Users may switch between modes anytime during input. Interactive input is the preferred method of entry. Batch mode uses an extensive number of forms, adding to the use's learning curve. The interactive mode follows the 1040 form sequence, and detailed schedules can be accessed from it when necessary. The depreciation module can be accessed from the corresponding schedules.
Input sheet information is comprehensive. All assets must be assigned an asset number, form or schedule reference number and application code. AMT lives must be entered for each asset. Mileage and related questions are included for luxury cars. Rating: Average.
Exceptions and observations: Business-use percentage must be computed and entered manually. While asset sale information is entered on the depreciation input sheet, the asset number must be entered manually on schedule 4797 to have the information carry over to that schedule. Depreciation calculation uses the declining-balance method. Capital gains and losses from passive K-is are treated as nonpassive for MAGI calculations. MAGI calculations do not include deductions for self-employed health insurance or Keogh contributions. The AMT calculations do not include an adjustment for gain on sale of business assets.
Overview: A-Plus Tax is designed for large tax preparers and those who do complex returns. Speed improvements have been promised for 1992. If a practitioner rates flexibility as more important than speed, then A-Plus Tax is a competitively priced choice in the high-end market.
CLR FAST-TAX COSYSTEM
Computer Language Research, Inc., 2395 Midway Road, Carrollton, Texas 75006 Telephone: (800) FAST-TAX, ext. 7600; (214) 250-7000; fax: (214) 2507589
Learning: This is one of the most difficult programs to learn. It takes about 40 hours for an administrator to become proficient, and 4 to 8 hours for a typical user. Rating: Below average.
Operation: In the input mode, data are entered directly to schedules, similar to actual/RS forms. Once a form is selected from the menu, data can be entered on the proper line by using the tab or enter keys. Since forms are layered (the most basic ones first), care must be taken to enter data at the lowest possible level; otherwise the information may not automatically carry through. Changing data entered, making corrections and moving around input screens are cumbersome. The F7 key is used to access supporting schedules, which often are nested. The depreciation module is comprehensive.
The program allows for user notes, reviewer notes and audit marks, a decided convenience, especially for the larger firm. Each mark and note is individually color coded and distinctive. Rating: Below average.
Exceptions and observations: CoSystem does not take any depreciation in the year of sale. The capital loss from the passive K-Is is treated as passive, while capital gains are treated as nonpassive for the MAGI calculation. Default AMT lives assigned to seven-year modified accelerated cost reduction system (MACRS) assets is 9.5 years. No adjusted gain or loss is included for AMT purposes for the sale of business assets. It is only one of two packages that correctly computed passive loss adjustment.
Overview: Despite its name, Fast-Tax is slow. But because it's a complete package, it appeals to many large firms. It offers the most forms and is the only package to support all states and cities. Major improvements have been promised for 1992's edition, which was not available for review, including the ability to access software directly from a CD-ROM and a bundled package with RIA's tax reference library.
CPAID MASTER TAX
CPAid Software, Inc., 1061 Fraternity Circle, Kent, Ohio 44240 Telephone: (800) 227-2437; fax: (216) 678-7093
Learning: The program is easy to learn. Screens are well organized with action prompts available at the bottom. The manual is readable and its index is satisfactory. Rating: Good.
Operation: Master Tax supports both batch and interactive modes. The batch input mode appears straightforward but was not tested. Under interactive processing, once a client is selected the user must first enter client information and filing status. Then the user is invited to choose the schedules and forms to be completed. When screens are called up, lower-level screens can be accessed as they are needed.
The depreciation module is not included in the base software. This add-on program can be accessed from the respective schedules. It provides for federal, state and AMT depreciation. The personal-use percentage must be entered manually for personal automobiles. A diagnostic routine must be accessed to identify schedules with required missing information and to ensure complete calculations of carryforward items between schedules. Rating: Average.
Exceptions and observations: K-1 information does not cover tax shelters. Capital gains and losses from passive K-Is are treated as passive for the MAGI calculation. For AMT purposes, no adjustment is made for the gain or loss on sale of the business asset. No passive loss adjustment is computed, even though adjustments are included for post-1986 depreciation. The software does not automatically bring up form 8271; it has to be requested and prepared manually. A health insurance deduction is not allocated automatically. Depreciation is calculated using IRS tables.
Overview: Master Tax is a sound package targeted to medium-sized tax practitioners. At an extra cost, it will provide a well-designed tax management and control feature, including client appointments, review notes and client tracking. Everything is priced a la carte, and the total cost of the program is somewhat high compared with the principal competition.
Digitax, Inc., 3001 South State Street, Suite 201, Ann Arbor, Michigan 48108 Telephone: (800) DIGITAX; (313) 663-2999; fax: (313) 663-1161
Learning: Input screens are organized by category, rather than by IRS form sequence. The manual is comprehensive and includes a tutorial as well as detailed instructions for each screen. Help screens are not context sensitive but include information for the entire schedule. Rating: Good.
Operation: Input supports interactive mode only. When a new client is selected, the user is asked to decide which of 29 available screens are needed for the client, arranged by major category. Once screens are picked, paging down brings up each schedule in sequence. Input is mostly straightforward except for the unique way function keys are assigned. K-1 input screens are somewhat different. Instead of asking questions about passive and active participation, the input screens provide separate columns for active and passive income for each line item.
Depreciation screens are extremely easy to use. Assets are accessed from the respective schedules. Separate sale information and state depreciation screens can be accessed, when appropriate. All required information about depreciation method and class life are reduced to a few choices, and these are automatically displayed in a client look-up table. Automobile business usage and sales information are handled properly and carried forward to their respective schedules automatically. The program calculates AMT depreciation automatically, but lives assigned by the software cannot be overridden. Changes and additions can be made by accessing the main menu and calling up the respective schedule. Changes require paging through each schedule to the point of change. Rating: Average.
Exceptions and observations: Tax-shelter registration has to be completed manually. Depreciation is determined by declining-balance calculations. The Keogh deduction is excluded from the MAGI calculation. The preparer has the option of assigning capital gains and losses from passive K-is as passive or nonpassive for the MAGI calculation. For AMT purposes, passive activity loss was not calculated, even though adjustments were made for both post-1986 depreciation and adjusted gain or loss.
Overview: Digitax has been designed to appeal to medium-sized to large tax practitioners. Although it is not as streamlined as some of its competition, it performs we where it counts and includes most major forms and schedules. List prices for state packages are somewhat on the high side.
(for California residents only) JetTax, Hutton Centre, 200 East Sandpointe Avenue, Suite 320, Santa Ana, California 92707 Telephone: (800) 527-3789; (714) 979-2860; fax: (714) 546-5908
Learning: JetTax's many unique features make the program difficult to learn. However, help screens are available and prompts are shown at the bottom of each page. The manuals (separate operator and batch operator) are comprehensive, but their indices are incomplete. Rating: Good.
Operation: The program supports a mouse. Data are entered by selecting one of 64 screens from a combined federal and state menu. Most of the choices refer to the appropriate IRS and state form number, with a brief description at the bottom of the screen for the choice highlighted. The menu is extremely crowded, making it difficult to find a specific schedule or input screen. Once a schedule is selected, information is entered on multiple screens by scrolling through the schedule. Supporting schedules are easily accessible for data entry. All input screens follow the IRS schedule format. When entering K-1 interest or dividend data, the program takes the user to schedule B to enter information directly to interest or dividend income.
The depreciation module, accessed directly from the respective schedules, is comprehensive, allowing entries for federal, AMT, state and book depreciation. While all four columns must be completed, the federal column can be copied to the other columns and necessary changes made.
Beware the DELETE key. It does more than eliminate a single character; it removes an entire line or record.
A handy extra for bulging hard disks: Upon exiting, client data can be compressed for storage. Rating: Above average.
Exceptions and observations: The sale of the partnership interest has to be entered manually on schedule D. Depreciation is calculated using the declining-balance formula. Capital gains and losses from passive K-Is are treated as passive for the MAGI calculation. For AMT purposes, adjustments were correctly included for post1986 depreciation, adjusted gain or loss on sale of business assets and the passive loss adjustment. It was only one of two packages to calculate the passive loss adjustment correctly.
Overview: Despite its relatively long learning curve and rather unorthodox approach in some areas, JetTax offers one of the best tax software packages. It includes a wide range of federal and state forms, performed extremely well on the benchmark test and is competitively priced.
Lacerte Software Corp., 4835 LBJ Freeway, loth floor, Dallas, Texas 75244 Telephone: (800) 765-7777; (214) 492-8500; fax: (214) 770-8689
Learning: The program is well organized and has context-sensitive help for each line entry. Individual screens, where appropriate, are worded to facilitate proper data entry. Lacerte's tutorial (which qualifies the user for 15 hours of CPE credit) provides an in-depth sample problem. Both the batch and the interactive preparer manuals are well prepared. Rating: Good.
Operation: The batch and interactive processing modes can be used interchangeably. The batch mode was not tested. The interactive menu is arranged by income-expense category and provides 46 worksheets, categorized by income, deductions, credits, taxes and other. When individual screens are accessed, data are entered by paging through multiple screens. Client notes can be attached to any schedule. The depreciation module is accessed from the main menu. Five screens are provided for each asset, which is cross-referenced to one of 13 forms and to the appropriate number. The depreciation method is chosen from a client lookup table. AMT depreciation, triggered automatically for MACRS assets, is based on entry of a class life for ACRS assets. Since entries are by category rather than IRS format, it is difficult for the new user to find where to enter some data, although changing data is easy. Once a schedule is prepared, it is necessary to blank all information to eliminate the schedule. Rating: Above average.
Exceptions and observations: Depreciation is calculated using IRS tables. Capital gains and losses from passive K-Is are treated as passive for MAGI calculation. Default AMT lives assigned to both 5and 7-year assets is 12 years. No adjustment is computed for the passive loss adjustment, even though adjustments are induded in the program for both capital gains and post-1986 depreciation.
Overview: Befitting its number-one ranking in popularity, Lacerte is a sound software package, with strong acceptance both for its interactive and batch processing modes. While it lacks the comprehensiveness to be considered the sole software choice of major firms, it deserves serious consideration for any high-volume practice.
SCS/Compute, Inc., 12444 Powerscourt Drive, St. Louis, Missouri 63131 Telephone: (800) 488-0779; (314) 966-2805; fax: (314) 966-0545
Learning: Ease of learning is rated as good. The screen layout, prompts and help keys facilitate data entry. The manual includes a brief tutorial, including sample batch input sheets. While the manual is well prepared, the index is skimpy. Rating: Good.
Operation: The program supports both batch and interactive input. In the batch mode, entries can be made to each schedule or by entering line numbers and amounts. Batch processing is fast and convenient. The user can "hotkey" between modes by pressing one key. In the interactive mode, entry can be made by IRS form (60 forms and schedules) or by income-expense categories (income, adjustments, credits, taxes, itemized deductions, payments and miscellaneous). Once a schedule is selected, the next schedule in the list can be accessed by paging down or by reentering the menu.
The software requires a mouse to access all menus; however, the mouse does not support entry within individual forms and schedules. A pull-down menu is available, and depreciation modules are accessed directly from it or from the respective schedule. Depreciation includes federal, state and AMT depreciation methods. AMT lives are entered by the system but can be overridden. Sales data are used to adjust current-year depreciation; however, the sales data must be entered manually on schedule 4797. Automobile business use is carried forward from schedule 2106 to calculate allowable depreciation. Changing, adding and deleting information are easy. Rating: Above average.
Exceptions and observations: Nominee interest must be included in total interest and deducted manually as excludable interest. There is no provision for state-exempt interest; this must be adjusted manually on the state return. Asset sale information must be entered manually on schedule 4797. Depreciation is calculated by IRS tables. Capital gains and losses from passive K-Is are treated as nonpassive for the MAGI calculation.
Overview: LMS/Tax is a solid tax package that has features to appeal to medium-sized practices, using both batch and interactive input, with strong national support. While first-year pricing is competitive, renewal pricing is higher than its principal competitors' quotes.
CCH Computax, Inc., Worldwide Postal Center, P.O. Box 92938, Los Angeles, California 90009 Telephone: (800) 45PROFX; (310) 543-6200; fax: (310) 543-8104
Learning: The user's manual is arranged alphabetically, rather than in a sequential order. Thus, it provides minimal help for either new or experienced users. No tutorial programs are provided. Rating: Below average.
Operation: ProSystem fx supports both batch and interactive modes. The batch mode was not tested. Input options are extensive. The preparer may choose from four methods: government forms, operator interview forms, professional interview forms and organizer interview forms. Despite the options, it may be wiser to use one input mode for the entire return. In using the government-forms mode, all required schedules can be accessed directly from the 1040 line items or from the menu, which consists of over 90 schedules and forms. Entry is straightforward. All schedules are nested, and supporting schedules for each are accessed by hotkey from the appropriate line.
The depreciation module in the government-forms view is accessed as a subschedule to form 4562 (depreciation expense) and it can be calculated for federal, state and AMT. Assets are tied to related schedules and contain both sales information and support for automobiles. All information is carried forward correctly.
Changing data was a problem. For example, I accidentally entered automobile and truck expenses on the wrong line on schedule C, along with supporting detail; when the DELETE key was used to correct the error, all detail items were erased and the support changed to show a zero balance. On recalculating the return, the original incorrect numbers reappeared. Similar problems occurred when fixed assets data were entered. Rating: Below average.
Exceptions and observations: Disposition of the entire partnership interest must be entered manually on schedule D. Depreciation is calculated using IRS tables. Capital gains and losses from passive K-Is are treated as nonpassive for the MAGI calculation. For AMT purposes, post-1986 depreciation adjustment is computed based on seven-year AMT lives for a five-year MACRS asset (automobile). No adjustment is included for passive loss adjustments, even though adjustments are shown.
Overview: ProSystem fx is a comprehensive package, providing most of the government forms needed for complex returns, appealing to medium-sized to large tax firms. But manuals need to be improved considerably and input screens redesigned to be more user friendly.
SCS/Compute, Inc., 2444 Powerscourt Drive, St. Louis, Missouri 63131 Telephone: (800) 488-0779; (314) 966-2805; fax: (314) 966-0545
Learning: Quick Tax is the lowest-priced entry of the 20 packages reviewed, yet it is a powerful program that offers ease of input and the ability to handle complex returns. Its base price also includes electronic filing capability.
Quick Tax is a lower-priced model of LMS (see review above for details), with the same screens, mouse support and features, except it does not offer network support and the number of entries is more limited. For example, Quick Tax supports 120 fixed assets, LMS, 726; Quick Tax supports 15 K-Is, LMS, 99; Quick Tax supports 15 rental properties, LMS, 24, etc. No business software is offered. It should appeal to small to medium-sized tax preparers.
Tax & Accounting Software Corp., 914 South Yorktown Avenue, Tulsa, Oklahoma 74136 Telephone: (800) 998-9990; (918) 493-5900; fax: (918) 493-6189
TAASCforce's 1040 module is similar in form and function to Best Programs' Tax Partner, which received excellent ratings for both ease of learning and data input. For the complete review of that program, see Tax Partner below. I did not review TAASCforce's business software.
Prentice Hall Professional Software, 400 Lake Park Drive, Atlanta, Georgia 30080 Telephone: (800) 241-3306; (404) 432-1996; fax: (404) 436-6742
Learning: Data screens follow major income-expense categories rather than IRS forms. Software conventions are unique to the software. For example, F1, typically the help key, is used to enter schedules, accept data, etc. The software manuals provide a sound overview of the program. The program lacks tutorials. Rating: Average.
Operation: The software supports both interactive and batch processing. All numerical data can be selected for verification in either mode. Before printing, the program provides an edit and approval function, printing out diagnostics and listing any errors on the return. The initial screens allow selection of various income-expense categories for data entry. Schedules are nested within each major category. The depreciation module supports federal, state and AMT depreciation methods. Sales information is entered through the depreciation module and carried forward to respective schedules. Depreciation information can be imported from either Prentice Hall's depreciation program or other fixed-asset programs. Rating: Average.
Exceptions and observations: Personal automobile mileage must be entered manually in the depreciation schedule. Depreciation is calculated using the declining-balance formula. Capital gains and losses from passive K-Is are treated as nonpassive for the MAGI calculation. For AMT purposes, no adjustment was computed for passive loss adjustment, although adjustments were made.
Overview: Tax Advantage is designed to appeal to medium-sized to large firms and offers the ability to process complex returns. User interface is not as friendly as other programs in its class or as Prentice Hall's business module, which was recently rewritten. Its price, considering the number of features, is reasonable.
Taxbyte, Inc., 1801 Sixth Avenue, Moline, Illinois 61265 Telephone: (800) 245-8299; (309) 764-7245; fax: (309) 764-0976 Learning: Everything, and we mean everything, is listed on the menu, including 59 federal forms and worksheets, a list of all states, running total of billing by time and by form, preparer and firm information and print, configure and other commands. Since each entry also shows a brief description, it is an extremely crowded screen and takes getting used to. Overall, however, learning is easy. The forms and schedules mostly follow federal forms, and comments and help screens usually (but not always) offer assistance for the cryptic line instructions. The manual follows the layout of the menu and sup| porting screens and gives short, but mostly adequate, descriptions of what each entry is for. Rating: Good.
Operation: Data are entered by using a hotkey to go directly to supporting schedules from the 1040 input screens or by selecting one of 59 forms from the federal return screen. Most are identified by the IRS form number with a brief description. Most input screens are as crowded as the main menu. The depreciation module, which is accessed directly from the respective schedules, allows for only tax and AMT depreciation. Listed assets are maintained on a separate worksheet from other depreciable assets.
While asset sales are recognized, the data are not automatically carried forward to the applicable form 4794 or schedule D.
Not all information is automatically carried forward to necessary schedules. For example, estimated tax payments are not calculated unless the user manually enters the estimated AGI for the following year. This could result in errors of omission, particularly since the program has no diagnostics for missing, incomplete or inconsistent data. Corrections require the user to page through all previous entries to change a particular item. Deleting an item or schedule entirely also is cumbersome. Rating: Average.
Exceptions and observations: The sale-of-the-business asset and partnership interest must be entered manually. Furthermore, form 4797 must be filled out completely before a loss reported on form 1040 can be carried forward. A supporting schedule is not included in schedule C to support automobile and truck expenses. Automobile expenses and personal use had to be calculated manually. AMT calculation is not automatic. Estimated income for the next year has to be entered manually before estimated payments calculations are done. The K-1 input sheets do not automatically generate schedule 8271 for tax-shelter reporting.
Depreciation is calculated using IRS tables. Capital gains and losses from passive K-is are treated as nonpassive for the MAGI calculation. There is a reduction in MAGI of $12,988, and the documentation doesn't tell why; this leads to a significantly greater rental loss allowance. For AMT purposes, no adjustments are made for post-1986 depreciation, adjusted gain or loss on the sale of business assets or for passive loss adjustment.
Overview: The software has been designed for input speed and should appeal to small to medium-sized practitioners who perform fairly simple returns. It requires the least hard disk space (4 Mb) of any product surveyed.
SCS/Compute, Inc., 12444 Powers-court Drive, St. Louis, Missouri 63131 Telephone: (800) 488-0779; (314) 966-2805; fax: (314) 966-0545
Learning: Despite the complexities of this program, the learning curve is fairly short. Since the input screens in the interactive mode are in government-forms sequence and processing is aided by context-sensitive help, data can be entered without referring to the manuals. Rating: Good.
Operation: The software supports both interactive and batch processing. Three options are available for interactive processing: full-screen entry (a copy of each input sheet appears on the screen), field entry (entries can be made by line item) and instant entry (data are entered by field numbers to a blank screen). Supporting schedules can be accessed directly from the 1040 format. Various levels of subschedules are accessed as needed. Once a schedule is generated, it is flagged on a form menu for the specific client. Notes can be generated for any schedule.
The depreciation module is accessed through the appropriate schedules. The program supports federal, state and AMT depreciation, which is calculated for each asset as entered. Automobile mileage and related questions are accessed directly through the depreciation module. Data changes are slow due to various schedule levels. Rating: Average.
Exceptions and observations: Depreciation is computed using Internal Revenue Service tax tables. Capital gains and losses from passive K-Is are treated as nonpassive for MAGI purposes. The AMT adjustment for sale of business asset is higher than normal, which may be the result of missing required input for AMT depreciation.
Overview: Tax Machine is designed for medium-sized to large practices and is the only package in this category that supports both Novell and UNIX network applications. Screens and overall programs are well designed.
Alpine Data, Inc., 737 South Townsend Avenue, Montrose, Colorado 81401 Telephone: (800) 525-1040; (303) 249-1400; fax: (303) 249-8511
Learning: The program is structured for ease of use. Although it offers limited help screens, their layout and sequence are logical and easy to work with. The users manual is short and helpful. Rating: Excellent.
Operation: Tax/Pack has a unique data-entry style. The initial client setup screen requests all information included on form 1040 not covered by supporting schedules. Data input is easy. Although they are not identical to IRS forms, entry is made (with a few exceptions) to a single-line prompt, which leads the tax preparer logically through the form or schedule. Calculated totals are displayed for all data entered for verification purposes. After the base data are entered, the user may enter other information through a short menu screen, called a Tax Pilot, or by entering the schedule code or form name at the prompt. For complicated returns, Tax Pilot is recommended. When this option is selected, the user is asked which forms and schedules are needed. Forms or schedules omitted can be added at any time. The software then calls up the schedules and forms in a sequence designed to be sure carry-forward information between schedules is properly handled.
The depreciation module is the easiest to work with of any software tested. Assets are referenced to their respective schedules. This full-screen view defaults for current-year assets to normal depreciation method, asset life and/RS code section. All may be overridden. Entry is made for federal basis only. AMT is calculated automatically; it is not explained and cannot be changed. Depreciation must be calculated for assets purchased in earlier years and adjusted for any accumulated depreciation differences, when applicable. Business use of automobiles and other listed assets must be entered manually. Sales and all depreciation information are carried forward to their respective schedules correctly. Changing and deleting data are easy. Both functions can be performed directly from the menu for each form or schedule. Rating: Excellent.
Exceptions and observations: Disposition of the entire partnership interest must be entered manually on schedule D. Also, taxshelter registration and businessuse percentage of automobiles have to be entered manually. State-exempt interest must be excluded manually from the state form. The interest later has to be entered manually as an adjustment on the state return. Depreciation is calculated using the declining-balance formula. Capital gains and losses from passive K-is are treated as nonpassive for the MAGI calculation. There was an unexplained difference of $440 in the MAGI calculation. For AMT purposes, no adjustment is computed for post1986 depreciation or for adjusted gains and losses on sale of business assets.
Overview: Tax/Pack is a sound package, designed for the small to medium-sized tax preparer. It handles net operating losses and amended returns, features not included in many competitors. The schedules and forms included are impressive. It is user friendly and easy to learn. Except for limitations in built-in calculations (improvements have been promised for 1992), it offers many features at a competitive price.
Best Programs, Inc., 11413 Isaac Newton Square, Reston, Virginia 22090 Telephone: (800) 368-2406; (703) 709-5200; fax: (703) 709-9368
Learning: Tax Partner is very user friendly. Help screens are available at all times. However, the topical index needs improving. Rating: Excellent.
Operation: Data are entered by selecting one of 56 screens from the federal return screen. Most are straightforward and refer to the IRS form number, with a brief description on the screen. The estimated taxes and payment penalty screens are a little confusing, however. Each screen has a maximum of 20 lines. Schedule C, for example, is divided into four subscreens, and the F10 key advances the user to the next form. Supporting schedules are easily accessible from the main schedules, when required. Client notes, however, are not available for each schedule but must be accessed separately from the main menu.
The depreciation module, accessed directly from the respective schedules, is comprehensive yet easy to use. When data are entered, for example, the indication that an asset is a luxury automobile will bring up the respective questions regarding business use, mileage, etc. It provides for overriding computed AMT lives, entering state differences in basis, forcing current year's depreciation, among other features. While asset sales are recognized, the data are not automatically carried forward to the applicable schedule. On exiting the depreciation screen, users have the option to print out (either to the screen or the printer) the depreciation summary to verify data. Rating: Excellent.
Exceptions and observations: The sale-of-the-business asset and partnership interest had to be entered manually on schedules 4797 and D, respectively. A supporting schedule is not included for sched* ule C for car and truck expenses. Depreciation is calculated by the declining-balance method. Capital gains and losses from passive K-Is are treated as nonpassive for the MAGI calculation. For AMT purposes, the program computed a significant difference for adjusted gains and losses on the sale of the business asset, which may have been partially due to missing required AMT depreciation input. No passive loss adjustment was computed, even though adjustments were included for both post-1986 depreciation and for adjusted gain on sale of business assets.
Overview: Tax Partner is for small to medium-sized practices. It's easy to learn, input is straightforward and it handles basic returns well. For 1992, Best is introducing a new package, Tax Partner 2000, for larger returns.
TAX RELIEF PLUS
MicroVision Software, Inc., 368 Veterans Memorial Highway, Commack, New York 11725 Telephone: (800) 829-7354; (516) 543-1040; fax: (516) 543-1175
Learning: This program is easy for first-time users. Help is available at all times and prompts appear at the bottom of the screen. However, the help function is not context sensitive. The manual is well organized and includes a short tutorial. Rating: Excellent.
Operation: Data can be entered in either interactive or batch modes. The batch mode follows government-forms sequence and appears easy to use; however, it was not tested. In the interactive mode, users can evoke desired forms by one of two methods: from government-forms sequence or from a main menu, which shows 51 schedules and forms and invites the user to a secondary menu for each schedule. As a result, the user can go directly to a particular screen within the schedule.
Depreciation is accessed from the respective schedules. To speed input, listed assets are separated from other fixed assets. Input sheets are compact. As each item is entered, a help window shows the options available for that item. The program supports only federal and AMT depreciation methods. Depreciation must be manually adjusted for sales, and all sales information reentered on schedule 4797. Changing data is somewhat difficult. Once a schedule or asset is selected, the program forces the preparer to complete the entire schedule before it can be deleted. Yet, overall data input is excellent. Rating: Excellent.
Exceptions and observations: Nominee interest must be entered as regular interest and then reentered as nominee interest. Schedule C does not provide for backup for automobile and truck expenses. Automobile business use must be entered manually in the depreciation module and business expenses manually calculated and entered on schedule C. Depreciation is calculated using IRS tables. Capital gains and losses from passive K-Is are treated as nonpassive for MAGI calculation. For AMT purposes, no adjusted gain or loss on the sale of business assets or passive loss adjustment is computed, although adjustments are included for post1986 depreciation.
Overview: Tax Relief Plus is a solid package for tax preparers with small to medium volume. Data input is fast, the program provides automatic calculations for data-entry verification and it handles most routine tax matters efficiently. Many special-purpose forms are not provided, and potential customers should review the forms to determine if they are needed for their practices.
Tax $imple, Inc., 431 Route 10, Randolph, New Jersey 07869 Telephone: (800) 323-2662; (201) 989-8955; fax: (201) 366-5877
Learning: TaxSimple's menu structure, processing sequence and condensed manual all make the program a bit difficult to learn. While the manual includes a brief tutorial, it does not have an index or help for each individual screen. Rating: Average.
Operation: The opening federal screen shows some 80 schedules, forms and worksheets. When completing the basic data, included as screen 1, the user must enter information for the following forms before completing the balance of the return: W-2s, K-1s, 4137 and 2106. This is done to ensure carryforward information between schedules is properly handled. K-1 worksheets are confusing; they must be entered for either taxpayer or spouse. To show them as joint investments, the user must enter half the information for each taxpayer. Additionally, only two K-1s can be accessed for each schedule E. When I tried to enter four K-1s, I was forced to access a second schedule E.
The depreciation module can be accessed from the respective schedules via schedule 4797. Each asset is cross-referenced to the respective schedule. Entry screens are straightforward and provide for regular and AMT depreciation methods. Sales information must be entered manually for schedule 4797. Rating: Average.
Exceptions and observations: Disposition of the entire partnership interest must be entered manually on schedule D. Self-employed health insurance needs to be calculated and entered on line 26 and schedule A. Tax-shelter registration has to be completed manually. Depreciation is calculated using IRS tables. Capital gains and losses from passive K-1s are treated as nonpassive for the MAGI calculation. For AMT purposes, no adjustment is computed for adjusted gains and losses on sale of business assets. Passive activity loss was not calculated.
Overview: Tax$imple should appeal to small to medium-sized practices. While it has many built-in features and a competitive price, improvements need to be made to basic layout, manuals and user friendliness to broaden its overall market appeal.
Laser Systems, 7 North Main, P.O. Box 407, Kaysville, Utah 84037 Telephone: (800) 669-1011; (801) 544-3090; fax: (801) 547-9835
Learning: TaxWorks's help screens are context sensitive, and available actions are shown at the bottom of the screen. The manuals are well organized and complete, although the index needs to be expanded. Rating: Excellent.
Operation: The software supports interactive and batch processing. Data entered in the interactive mode may be reentered through a verification process. After basic client data, including dependent information, are entered, forms are accessed from a menu that offers 56 forms and schedules. Paging down from the main menu provides a detailed list with descriptions for each form. State forms and additional copies of appropriate schedules are accessed from the menu. Client notes can be made for any form or schedule. While the overall layout is extremely convenient, forms completed or in process are not highlighted on the forms menu.
Depreciation is entered through a separate program, called the Asset Manager, which supports both the 1040 and business returns. Data may be entered in either input or batch modes. Assets are linked to one of 16 applicable forms and up to 99 schedules. The Asset Manager supports federal, state and AMT depreciation methods and handles passive activity assets. Business use is calculated automatically from mileage data that are entered for automobiles. Entered sales information carries over properly for both 1245 and 1250 assets. Changing data is easy. Entire schedules can be deleted by using the F9 key. Rating: Above average.
Exceptions and observations:
State-exempt interest must be excluded manually from the state form; the interest later has to be entered manually as an adjustment on the state return. Disposition of the entire partnership interest must be manually entered on schedule D. While the tax-shelter identification number is requested, form 8271 must be prepared manually. Depreciation is calculated using the declining-balance formula. Capital gains from passive K-Is are treated as passive for the MAGI calculation; capital losses are treated as nonpassive. For AMT purposes, adjustment for post-1986 depreciation is incorrectly related to the rental property. No losses on the sale of business assets or passive loss adjustments are computed.
Overview: TaxWorks is a sound program that should appeal to both small and medium-sized preparers. It is competitively priced and offers many features that many more expensive competitors do not. Special praise to Laser Systems for breaking ranks with other vendors: Instead of establishing'a low teaser price for the federal software and then tacking on extras for laser printing, amended returns, organizers and electronic filing, Laser Systems bundles its prices and lets the prospective customer know up front what the software will cost.
1040 Solutions, Inc. (CCH Computax, Inc.), Worldwide Postal Center, P.O. Box 92938, Los Angeles, California 90009 Telephone: (800) 544-9552; (310) 543-4002; fax: (310) 543-8104
Learning: Because the menu is complicated, learning 1040 Solutions takes a little longer than average. The manual, while well prepared, doesn't provide enough detail. A tutorial and expanded general section could reduce learning time. Rating: Average.
Operation: The program supports both batch and interactive modes. Batch input sheets follow the interactive screen format, but entry is made to blank screens by typing in line number and amounts. Input sheets can be used to enter information interactively. Batch processing was not tested. The in* teractive input menu consists of three pages, including 95 forms and schedules. Entry to a form or schedule is made in one of three ways: through a number assigned by 1040 Solutions (which the user has to look up), by selecting from a menu or by paging through all available forms. Screen designs are for complex returns.
Depreciation is entered through a separate asset module, included as one of the 95 screens. Entries under the asset module are made to subschedules for each applicable schedule. Depreciation supports federal and state methods. The depreciation module properly handled sale of assets and automobile, although business-use percentages had to be entered manually. All information is carried forward to respective schedules. Changing data is easy. Schedules also may be deleted. Rating: Average.
Exceptions and observations:
Disposition of the entire partnership interest must be entered manually on schedule D. The businessuse percentage has to be entered for automobiles. Depreciation is calculated using IRS tables. Capital gains and losses from the passive K-Is are treated as nonpassive for MAGI calculation. For AMT purposes, 1040 Solutions computes no adjustment for post-1986 depreciation or for adjusted gains and losses on sale of business assets. It incorrectly makes an adjustment for investment interest of $4,500.
Overview: The program is designed for the medium-sized to large firm. It can handle complex returns. While it lacks the scope of its big brother, ProSystem rx, it is a sound, albeit pricey, package.
ChipSoft, Inc., 6256 Greenwich Drive, Suite 400, San Diego, California 92122 Telephone: (619) 453-4446; fax: (800) 755-1040
Learning: Users who have graduated from the personal version of TurboTax will have an easy time adjusting to the professional version. Others may have difficulty. Many line items lack help, and although a menu may be accessed from any form, the layout is confusing. Its manuals are well designed and come with a short tutorial. Although the index is comprehensive, some of the references are incorrect. Rating: Average.
Operation: The software supports interactive and batch processing and they are organized similarly. I did not review the batch mode. In the interactive mode, forms are accessed through one of two menus: government forms or worksheets. State forms are in a separate program accessed from the main menu.
The software supports a mouse. Notes may be added at any time from the menu. Supporting crossreferenced schedules can be accessed directly, and can be hotkeyed back to the original schedule. Schedules C, E and F, although in government-form format, skip between two columns, instead of moving in line sequence, to enter expenses. The preparer also is required to answer practically every question on every form--no defaults are accepted.
Depreciation is entered through a separate worksheet. The software has a shortcut asset-entry mode, but it's not flagged as a screen option. Business use has to be entered manually for automobiles, and sales information does not carry forward to schedules 4797 or D. Depreciation supports federal and AMT depreciation methods only. Assets are best entered from the respective schedules to ensure that depreciation is carried over properly. Rating: Average.
Exceptions and observations:
State-exempt interest must be excluded manually from the state form. Disposition of the entire partnership interest must be entered manually on schedule D. Form 8271 must be prepared manually; the K-1 does not request tax-shelter information. Automobile and truck expenses for schedule C properly use a 2106 format; however, interest from rental vehicles is carried to schedule C's line item, "Rent-Equipment/Vehicles." To enter additional interest expense on this line, the automobile calculation must be overwritten. The preparer must enter the amount of the prior year's schedule A expenses before the program allows entry of state tax refunds as current-year income. Self-employed health insurance does not ask if a deduction is for taxpayer or spouse.
Depreciation is calculated using the declining-balance method. Capital gains and losses from passive K-Is are treated as nonpassive for the MAGI calculation. The Keogh deduction is not included in the MAGI calculation. For AMT purposes, TurboTax shows the highest depreciation adjustment of any package, $4,053; however, supporting detail is not included to determine its basis. No adjustments are made for either the sale of business assets or for the passive-loss adjustment.
This year TurboTax says it has added notations to identify assumptions made by the program for special tax treatment items, providing details to alternative solutions.
Overview: TurboTax is designed to appeal to the small tax preparer. The professional version closely resembles the personal version and for many it is a normal step up. It is a popular product, based largely on price-features comparison. SAM W. STEARMAN, CPA, is the principal in an accounting and management consulting practice in Oceanside, California. He is a member of the American Institute of CPAs.
WHAT TO WATCH WHEN buying tax preparation software:
* RELEASE PROBLEMS: A CPA considering changing packages should check with current users to see if the vendor has had release problems, especially with state software.
* PRICING: Most vendors offer discounts--in some instances, deep discounts--to get new business, particularly for early purchase commitments. Renewal prices are not as flexible. If a vendor's first-year price is particularly enticing, the CPA firm should take a close look in comparing renewal pricing.
* TECHNICAL SUPPORT: Need for technical support is dependent on a firm's personnel, the complexities of the software or the nature of its tax practice. This review has not assessed the quality of a publisher's support personnel and its speed of responsiveness.
* PREPARATION SPEED: While software costs are important, the time it requires to process, review and print a tax return can be far more important to medium-sized to large firms. CPAs should look for software that makes input easy and understand that there is often a trade-off between extra features and speed.
SAM W. STEARMAN, CPA, is the principal in an accounting and management consulting practice in Oceanside, california. He is a member of the American Institute of CPAs.
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|Author:||Stearman, Sam W.|
|Publication:||Journal of Accountancy|
|Article Type:||Buyers Guide|
|Date:||Oct 1, 1992|
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